United Asks Judge to Void Labor Contracts

DAVE CARPENTER

Published 7:00 pm, Sunday, March 16, 2003

AP Business Writer

United Airlines asked a bankruptcy judge Monday to nullify its labor contracts after failing to reach agreements by a self-imposed deadline, raising the pressure on its unions to agree to long-term cost cuts.

The move gives the two sides until May 1 to settle on negotiated terms or the court could void the contracts _ a drastic and risky means of slashing labor costs that is rarely employed in airline bankruptcies.

If agreements aren't in place by then, the requested ruling by Judge Eugene Wedoff would enable United to impose its own, stricter terms, helping it stay on its lenders' timetable to show progress in bankruptcy or lose its financing.

That would send ripples through the beleaguered airline industry, where other troubled carriers are closely watching United's efforts to lower costs in hopes of making their own severe labor cost reductions.

It also would effectively wipe out decades' worth of negotiated contract provisions at United, the world's second-largest airline. Nullifying contracts is generally avoided in the industry, in part because of the danger of alienating employees at a time when labor turmoil can doom a struggling carrier.

United also said the recent slowdown in travel and bookings because of Iraqi war fears will force it to further reduce employees' interim wages by 9 percent or more within a month if it doesn't get "sufficient relief" from either the government or its lenders.

The airline has warned since January, when it secured interim wage cuts worth $70 million a month in savings, that it would begin the contract-scrapping process if unions didn't agree to concessions by mid-March.

But the talks with unions remain bogged down over both the size of United's requested labor cuts _ 31 percent, or $2.56 billion annually, through 2008 _ and its plan to start a low-fare carrier, which would entail a lower wage scale and separate work rules.

The pilots' and flight attendants' unions criticized the filing and said United was using the bankruptcy process to seek far deeper cuts than are needed to make it successful again.

United emphasized in an announcement that its priority remains on negotiated contracts but that it had to file the motion Monday to ensure that the necessary cost savings are in place by May.

"Between now and May 1st, we will continue to negotiate around the clock in the belief that we can reach consensual agreements with all of our union groups and render a ruling from the court unnecessary," said chief executive Glenn Tilton. "However, all of us will have to accept changes that are broad and deep, and those changes require that we take an entirely new approach to competing and succeeding in this changed industry."

All three main unions said they would work to reach negotiated contract settlements.

A top Machinists' union official said in a posting to members that time remains for negotiated agreements with United and a successful restructuring.

Randy Canale, chairman of District 141 representing baggage handlers and public contact workers, said negotiations would continue "in a nonstop effort to make action on today's court application unnecessary."

But pilots' union leader Paul Whiteford said he was "extremely dismayed" and called United's proposal an "overreach" in terms of the cuts it envisions.

"Our contract is the product of 52 years of good-faith collective bargaining conducted under federal labor law," he said. "To seek to wipe out this contract by the stroke of a judge's pen is disheartening."